In case your business is in an EU country that has adopted vat then you can opt for flat rate vat if you want to simplify your accounting and stay far from presenting vat figures in full detail. This scheme enables you to simply calculate a prescribed percentage of your vat inclusive sales as being the final vat figure without going into intricate sale or purchase details, as it is normally required whenever you file vat returns.
For those who have a basic problem of being aware what is vat and foresee problems to maintain detailed vat accounts then you can opt for the vat flat rate scheme provided you fulfillthe factors put in place by the tax authorities inside your country. In case your organization is situated in Great Britain then you can go for vat flat rate if your estimated sales turnover in the next year excluding vat is not over £150,000 or including vat is not over £187,500. It is possible to remain under this scheme until your turnover vat number search touches £225,000.
Even though you will still need to display the vat amount in your vat invoice, you don’t need to keep a detailed account of your vat figures on the sale or purchase as you might need to do under normal vat circumstances. You will, however not be able to go in for vat reclaim just in case you opt for the flat rate vat scheme. UK offers a 1% discount scheme for the 1st year for businesses that opt for this scheme. In case you offer services or goods that come under different vat rates then you’ll have to apply the top vat rate should you choose opt for this scheme.
Thus, if you purchase or sell goods or services under reduced vat rates or have to reclaim vat which has already been paid this scheme wouldn’t be suitable for you. However, should you mostly deal in services or goods that entail standard vat rates, do not need to have any vat refund, or engage in retail sale then your vat flat rate scheme will be perfect for both you and your business. You could find added time to concentrate on growing your organization instead of passing time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses choosing the scheme in the UK. You will have to review eu vat rules if your organization is located in another eu country. You can join the flat rate vat scheme in your country by studying the rules and completing the necessary vat form. You will also need to find the classification of your services and goods so that you can make use of the appropriate flat vat rate while billing your clients. You may also leave the scheme to migrate to a different vat scheme by informing the relevant vat authorities prior to making your move.
Although the system of vat is rather simple to apply, you will still require the services of an expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, in case your business format is fairly simple and you offer limited services or goods that come under standard vat rates you’ll be able to go in for the flat rate vat scheme to simplify your accounting.